Things You Should Know if You Want to Flip a House

Buying an investment property in order to flip and resell is not for the faint of heart but it’s also not something to be too scared of. As long as you do your research on your homework and have a real estate agent that understands your needs, buying and flipping is a great way to expand your real estate portfolio and make some extra money. Here are some things to know if you’re planning on flipping a house.

#1. Understand closing costs and capital gains tax.

Unless you’re selling the home yourself, you need to take into account closing costs with real estate commissions and capital gains tax. If you make a profit on the flip, which is the whole idea, and have on the house for a year or less, you will be taxed on short-term capital gains. These are taxed at your ordinary income tax rate so it’s important to factor that into the sale.

#2. Additional cost for borrowing money.

If you are planning on taking out a loan to buy the investment property, you need to make sure you understand what it costs to borrow money. Not only will you have costs for improving the house, but you will need to be paying a mortgage and property taxes on it until it sells.

#3. The money is made when you buy, not sell the house.

I know that might not make sense, but you don’t want to overpay for a house. This also means in your mortgage payment as well. Lenders will want a higher deposit than for the residential markets. You might need to put at least 25% down and ask the lender if they’re willing to give you a short term mortgage to buy and flip the house based on the value of the asset. You may need to shop around for a loan that will give you the best rate of return now and when you plan on selling. A typical bank may not be the most lucrative or economical place to get a loan for a rehab property.

#4. Don’t just buy a foreclosure or short sale.

Most foreclosures or short sales are sold by the bank and they may be price below market value because they’ve been neglected. Rehabbing could be extremely expensive so don’t just limit your property search to foreclosures. You might find a great deal that just needs a little bit of cosmetic repair.

#5. Never neglect the inspection.

You might even consider an inspection before making an offer. There’s no point to make an offer if you know that the home will need thousands of dollars in the structural repair or corrections to plumbing or electricity, some of the most expensive repairs out there.

#6. Don’t over improve.

You want to buy the cheapest house in the best neighborhood, not the other way around. You want to rapidly increase the value of the house so don’t over improve the property past the maximum sales in that neighborhood.

#7. Market timing.

Timing the market is critical to understanding and getting the best deal. Of course, you want to buy a home at the lowest price possible and sell it for a higher amount, but make sure that the timing is right and a good real estate agent that understands the market and individual neighborhoods can help you make a more informed decision.

If you’re planning on rehabbing your property give us a call. We’d love to send you a list of properties that might work for your situation and your budget throughout Brunswick County and Sunset Beach.

What our clients say

Zillow – WOIDATRC

"Real estate transactions are usually involved and this was no exception. From our first meeting to the final script on...

5.0

2017-12-19T22:13:46+00:00

"Real estate transactions are usually involved and this was no exception. From our first meeting to the final script on the purchase contract, Frank and Karen were extraordinary examples of sterling professionalism, care, and concern. Tell me how many buyer brokers would make trips to the potential purchase to check on progress and assure all was in order without being asked. Frank and Karen did. Tell me how many would go the extra mile sans any solicitation to protect the buyers interest during each and every step of a transaction. Frank and Karen did. Tell me how many people have earned your implicit trust for their consistent honesty and integrity. Frank and Karen did. Frank and Karen were expert at developing and maintaining a relationship--a rare talent these days, and more important to us than the actual purchase itself. My wife and I gained more than a new home -- we gained genuine friends. Frank and Karen are consummate buyer brokers and we cannot recommend them highly enough. Frank and Karen, thank you both for the pleasure of having made your acquaintance and for all of your assistance. R & L."

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Steve & Jean DeVito

“The Bakers treated us like family during our whirlwind weekend of looking at houses. Prior to our on-site visit to...

2015-03-16T20:17:46+00:00

“The Bakers treated us like family during our whirlwind weekend of looking at houses. Prior to our on-site visit to Sunset Beach they created a portal and populated it with properties that met our ever-evolving criteria. By time we arrived we had a good feel for what we could afford and what was available that met our criteria. The Bakers, especially Karen, were able to make sense of what we thought we were looking for and eventually matched us with a house that we ended up purchasing — Karen called it the “This is it” house and she was right. We are loving our 2nd home and appreciate how painless Karen and Frank made the process. All the paperwork was done seamlessly and quickly and the closing went off without a hitch. The Bakers do not believe in the hard sell — they gave us the knowledge we needed and the guidance we needed to make our dream a reality.”

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Matt & Amy Carver

Amy and I have bought and sold four properties in the past twelve years. Both of you are the best...

2015-03-16T20:18:22+00:00

Amy and I have bought and sold four properties in the past twelve years. Both of you are the best realtors we have ever dealt with. Amy and I both felt we could trust you to look out for our interest. The level of service you provided was outstanding, from taking the trash out, helping the buyer with inspecting the irrigation system, dealing with our tenants, always being there if we needed to ask a question, providing constant updates on the market and always keeping us informed on the sale of our house. I think your next venture should be training other realtors, because both of you have mastered the art of providing excellent service. I will be sure to recommend the Frank and Karen team to anybody looking for a trust worthy, knowledgeable and top performing realtor. It was a pleasure working with both of you.”

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Ernie & Carol G.

“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When...

2015-03-16T20:18:50+00:00

“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When we made up our minds which one we wanted, they got us the best deal on it. We were very satisfided with them. After the purchased was made & we moved in, they were still there to answer any questions or problems that we might of had. Like I said, they are the BEST.”

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Dave & Rose

“Thanks again for all the time you spent with us, As overwhelming as it was, you two made it fun”

2015-03-16T20:19:23+00:00

“Thanks again for all the time you spent with us, As overwhelming as it was, you two made it fun”